The Loreley 30 v Credit Suisse litigation considered whether the identity of the persons authorised to give instructions to solicitors on behalf of a corporate client in ongoing litigation is subject to litigation privilege.
Francesca Bugg reviews the Court of Appeal decision in Loreley Financing (Jersey) No 30 Limited v Credit Suisse Securities (Europe) Limited & others  EWCA Civ 1484.
The underlying claim concerned the purchase of collateralised debt obligation (“CDO”) notes for US$100m in 2007. These notes were linked to the credit of residential mortgage-backed securities (“RMBSs”). The defendants had been involved in the structuring and selling of the CDO notes as well as the securitisation of a number of the underlying RMBS that were the underlying assets of the CDO.
The claimant alleged fraudulent misrepresentation and unlawful means conspiracy in relation to the securitisation by the defendant of the underlying RMBSs and representations made in the sale of the CDO notes.
One of the pleaded defences by the defendant was limitation, including questioning what the claimant, with reasonable diligence, could have discovered at certain dates before the issue of proceedings. It was common ground that primary limitation had expired in this case, and the claimants were relying on section 32 of the 1980 Limitation Act to extend the limitation period. A key provision of section 32 is:
“the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.”
The claimants argued that they could only have discovered concealment of the fraud in January 2017 when the US Department of Justice announced a US$5.28bn settlement with Credit Suisse and disclosed both the settlement agreement and the agreed Statement of Facts. The claimant, a special purpose vehicle with no employees, whose directors are supplied by a professional services company, was asked for limitation purposes whose knowledge is to be attributed to them.
In his recent judgment in the HP Autonomy case, Mr Justice Hildyard treated Hewlett Packard as the controlling mind of “Bid Co”, the special purpose entity used to purchase Autonomy, for the purposes of determining reliance. He deemed Bid Co’s reliance as that of Hewlett Packard.
The defendants in this case were seeking to attribute the knowledge of those giving instructions to the claimant, Loreley Financing (Jersey) No 30 Ltd (“Loreley”), for the purposes of limitation. Specifically, the defendants requested to know whether KfW, a German bank (80% owned by the Federal Republic of Germany) and one of the claimant’s creditors, was authorised to give instructions to Loreley’s solicitors. The claimant argued that the information requested was covered by litigation privilege.
The High Court concluded that the answer to the question whether the identity of a person communicating with a lawyer is privileged lies in whether two requirements are met:
(i) whether the communication is privileged, and
(ii) whether that privilege would be undermined by the disclosure of identity sought.
The court determined that the requirements were not met and the identities were not protected by privilege.
The claimant appealed, arguing litigation privilege falls within a “zone of privacy”.
What is litigation privilege?
Despite the absence of an existing authority that addresses the precise issue in the Loreley case, the court noted that litigation privilege is well-trodden ground.
Litigation privilege allows a litigant or potential litigant to investigate a potential dispute without the worry of being obliged to disclose the investigations to their opponent.
Lord Justice Males, giving the leading judgment, set out the requirements for litigation privilege as stated by Lord Carswell in Three Rivers (No. 6)  UKHL 48:
- litigation must be in progress or in contemplation,
- the communications must have been made for the sole or dominant purpose of conducting that litigation,
- the litigation must be adversarial, not investigative or inquisitorial.
Noting the criteria concerned only communications, the court commented on the rationale for litigation privilege, citing numerous cases, including Three Rivers (No. 6): see R v Derby Magistrates Court, ex parte B  AC 487, 507:
“A man must be able to consult his lawyer in confidence, since otherwise he might hold back half the truth. The client must be sure that what he tells his lawyer in confidence will never be revealed without his consent.”
Therefore, deciding whether litigation privilege extends to the identity of the persons communicating with a solicitor in relation to litigation depends on whether the disclosure of their identity would inhibit an open and candid discussion with their lawyer and affect the client’s ability to prepare its case.
The claimant submitted that the purpose of litigation privilege is to establish a “zone of privacy” around a party’s preparation for litigation, and disclosing the identities of those authorised to provide instructions might provide an advantage to the opposing party, for example, if someone is known to be involved with settling matters. Additionally, the claimant argued in the context of litigation privilege, the identity of those authorised to give instructions is just as privileged as the identity of a prospective witness or expert.
For the defendants, it was submitted that privilege, whether litigation privilege or legal advice privilege, is concerned with communications and not merely with information or facts and that the “zone of privacy” is too broad.
The Court of Appeal agreed with the High Court, rejecting the “zone of privacy” because there was no evidence that privilege would be undermined by the disclosure of the information sought.
The court supported the defendant’s submissions, rejecting the claimant’s arguments that a job title might expose the intention of the party. Lord Justice Males said he did not think he had ever come across a “Head of Litigation Settlement” in over 40 years’ experience of commercial litigation. He added that if a case arose where the identity of someone would reveal information relating to the content of communications, the basis of that claim must be explained to enable the court to evaluate it.
Lord Justice Males stated it was commonplace for the identity of a person giving instructions to a solicitor to be revealed, clarifying that litigation privilege attaches to communications (including secondary evidence of such communications) rather than information or facts divorced from such communications. He added that, in general, disclosing an individual’s identity would not reveal anything about the content of the communications and would not affect the client’s ability to prepare their case.
Although cases were referenced where a client’s identity or contact details were privileged, these are the exceptions. For example, in JSC BTA Bank v Ablyazov  EWHC 1252, the client’s contact details were communicated to enable him to seek legal advice.
Each case will be fact specific, but it is evident that litigation privilege is a balancing act. Although it is a fundamental right, it must be considered that the effect of litigation privilege is depriving the court of potentially relevant evidence.
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